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Friendship Housing Group Lecture, Birmingham 1997

Paddy Ashdown (Liberal Democrat)

Location: Birmingham

So it has finally happened!

The Conservative Party has been plunged into what any commercial organisation in a similar condition would consider a quick and merciful liquidation.

And the beauty of it is, everyone wins.

The Tories can at long last indulge their passion for squabbling amongst themselves without the irritation of having to govern the rest of us.

And we can finally get on with our lives without the irritation of being governed by them.

The sense of liberation is tangible!

A chance for change

But getting rid of that discredited, distracted and directionless rabble was only the first step. The real work is still to be done.

Restoring trust in our political process.

Protecting our environment.

Building the foundations for long-term growth and prosperity.

Increasing our influence on the world stage and forging a new settlement with our European partners.

All these steps, and many more besides, remain to be taken.

But there is one challenge facing our nation today that in human terms, stands head and shoulders above the rest as deserving considered yet speedy action.

I refer to the task of social renewal, of re-building the essential fabric of community life which has been fraying, and in some places, disintegrating over the last two decades.

Such a task will not be easy. My travels around some of the forgotten estates of urban Britain have left me with no illusions about that.

But it is an effort we must make. Inaction is simply not an option.

With crime and drug abuse rampant, illiteracy high, unemployment entrenched and institutionalised in many parts of the country, and whole swathes of our society simply cut off from the opportunities the rest of us take for granted, anything short of a crusade would be woefully inadequate.

But in launching that crusade, we must not get bogged down in political doctrines or restricted by received wisdoms.

Where traditional instruments of social and personal advance are clearly popular and effective, let us say so and commit the funds they need to survive. The National Health Service and our comprehensive education system are the two most obvious examples here.

But where current systems do not enjoy overwhelming public support and are self evidently not working, as could be said of many parts of the welfare state, we must be bold in our search for better alternatives.

For nothing constitutes a greater obstacle to change than an obsessive pre-occupation with the past.

And nothing poses a greater threat to the reform of our welfare state than knee-jerk deference to previous methods or traditional structures - the fatalistic assumption that this can’t be improved, that that can’t be touched, that the status quo is set in stone.

The only sacred cow that must not be slain in the welfare debate is our duty to the poor and to each other.

A sense of duty the British people instinctively hold, and which almost two decades of rampant individualism have failed to extinguish.

So let’s not assume that reform is a threat. That change must be resisted.

If our path is lit by the beacon of decency and compassion, our ideological crutches will soon be seen for the unnecessary baggage that they are.

If we judge reforms by their compatibility with human need, rather than political dogmas, we will move that much quicker towards the goal of social cohesion and the vision of shared prosperity.

The need for change

But before turning to the question of how to reform welfare, let us begin by asking why we need to reform it at all?

There are essentially three main reasons:

The first, and in my view, most irresistible force for change, comes from the growing disparity between the post-war social settlement on the one hand, and the demands of the modern age on the other.

Between what is now required of welfare, and what the welfare system is capable of delivering.

When that great Liberal, William Beveridge, launched his attack on the five giants of want, ignorance, idleness, squalor and disease, he did so at a time of low unemployment, short life expectancy, stable and predictable job prospects, high levels of family support, and an atmosphere of broad political consensus. Circumstances which exactly lent themselves to the National Insurance model.

But the Britain of today is barely recognisable from the one which limped, hurt but hopeful, from the ruins of the second world war.

The sense of collective solidarity and political agreement which typified the post-war era, have been dissipated by the passing of time, and the coming of Margaret Thatcher.

So too, the expectation of a ‘job for life’.

The demands of the global economy, the decline of the manufacturing and industrial sectors, the growth of the services industries, the rise of unemployment and the long-overdue appearance of women in the work place - all these factors have transformed British labour markets from those of 1945.

Add to this the ageing of the population and the fragmentation of the ‘traditional’ family structure, and it soon becomes clear why the welfare state has struggled to keep pace with events.

But there is a second, equally fundamental reason why the status quo is widely seen as untenable:

The welfare state is suffering from a loss of legitimacy as public confidence in the system has waned.

In other words, it has lost the support of many of the people it exists to serve.

The appeal of Beveridge’s ideas stemmed from his ability to draw on the strengths of competing visions, and the ambitions of different groups.

Like so many Liberals before and since, he sought to balance the ideas of ‘right’ and ‘left’.

Between self-reliance and self-help on the one hand, and altruism and generosity on the other.

Between what is best done on our own, and what we do best together.

Public and private, family and state.

At each and every stage, the welfare system was designed to reflect the unwritten social contract between citizen and state on which it was based, and from which its legitimacy flowed.

Yet there is a growing feeling that this contract has been broken.

Those who find themselves stuck in welfare’s poverty traps, or caught in its fault lines, have no obvious alternative to a life of grim dependence.

Those who have scrimped and saved for a rainy day, meanwhile, see their efforts go unrewarded and their thrift harshly punished.

For them, the promise of cover from the “cradle to the grave” must appear a very hollow one.

To the man in the ‘Dog and Duck’ ‘the Clapham Omnibus’ or at home in ‘Arcacia Drive’, the welfare state increasingly seems a sprawling monolith, a black hole into which his taxes simply disappear.

A costly, faceless and bureaucratic machine, spewing out giros to the helpless and hopeless, with little obvious sign of any personal or societal gain to show for it.

Resentment builds, so-called “scroungers” are blamed, and the legitimacy of the system gradually drips away.

The poor are left dependent and vilified, while others feel let down and frustrated.

It is a situation we may deplore, but one we cannot possibly ignore.

Nor can I ignore the third main reason for reform - the proven inability of the welfare state to satisfy demand.

Whether this inability is real or merely perceived is largely immaterial. The result is the same.

A gulf between what individuals need and what the state can supply. A gulf which is big and getting bigger.

Spiralling demand. Static supply.

Two powerful, immovable forces colliding.

In some countries, France and Germany for instance, this clash has resulted in a crisis of public expenditure as tax and borrowing soar to fund the state’s social commitments.

Here in Britain, despite the escalating cost of welfare, the crisis is more of supply, as prioritising, cutting and rationing become the order of the day.

Paltry pensions falling in value year on year.

Family homes sold to pay for care.

Benefit after benefit being more targeted, more tightly means tested and less able to improve, or even maintain, basic standards of living.

The irony of it is, of course, that this constant erosion of public provision ultimately costs us more, as people are forced into the private sector to plug the gaps.

You can see it in health, education, long-term care and elsewhere.

The creeping Americanisation of our social welfare.

The gradual shift towards the false economy of personal, rather than collective, payment.

The way in which this destructive, yet self-perpetuating cycle works is chillingly simple:

The paucity of public provision necessitates private top-ups.

The cost of these additional private payments reduces disposable incomes.

And a reduction in disposable incomes in turn increases the popularity of the unsustainable tax-cuts which gave rise to the problem in the first place.

Not for nothing is it said that services just for the poor, soon become poor services.

A new way, a better future

So what are we to learn from these trends?

What clues are to be garnered from the past and heeded in the future?

Well the first point to make is that any new systems must be tailored to the demographic, economic, social, and cultural circumstances of the next century, with all the lifestyle fluidity that century is likely to bring.

We need a robust, yet flexible system of provision to offset the mobility and flux of people’s earning abilities.

Equipping people with the skills they will need to compete and succeed is the most obvious requirement in this respect.

Education and re-education.

Training and re-training.

Not one chance, or even a second chance, but a third and a fourth and a fifth chance for everyone to learn new skills, to refine their specialist knowledge and increase their expertise.

For those of working age, then, the primary task of welfare must be to provide a well of educational and training opportunities to which people can return when they need to.

To get those without work out of the house, and into the college, the firm, the training centre and so forth.

And to keep those in work constantly up to date with new methods, new technologies and new thinking.

During the last election, my Party promised a Benefit Transfer Scheme to help the unemployed get a foot in the company door with the promise of real training and the prospect of a real job.

An example of the specific, practical measures our welfare system should pioneer, encourage and expand.

If we are to provide bridges for people to get back into work, if we are to break open the poverty traps holding so many people back, then initiatives like the Benefit Transfer Scheme must become the rule, not the innovative exception.

Of course, no amount of schemes, initiatives and ‘welfare to work’ programmes will make a significant and enduring impact if they continue to run up against all the anomalies and absurdities of the tax and benefit systems within which they must operate.

That someone on the dole can have their net income reduced by re-entering the labour market is a senseless situation which must be brought to an end.

Much of this work will involve detailed calculations about thresholds, tapers and credits - the detail where the devil so often lurks.

The Benefits Agency too must adapt, becoming a truly pro-active body helping individuals to realise their ambitions and fulfil their dreams, not just a collection of depressing out-posts where giros are collected and job ads perused.

But if we want welfare to once again become the engine for social advance and personal fulfilment, we must look beyond individual changes, technical adjustments and isolated examples of good practice.

For what is really needed is a wider cultural transformation which will change the whole way we think about welfare.

But such a shift will only come about if provoked by a broad transformation in the way the welfare state operates.

Perhaps the biggest single change in this respect would be a recognition of the fact that the welfare state, like all our other institutions, belongs to the people, and that power and control over it should therefore be delegated upwards, not downwards.

Rather than the remote and unresponsive approach we have today in which checks are simply handed out to passive, uninformed recipients, we should be moving towards a bottom-up approach in which individuals control and manage their own affairs to a greater extent, where the level of contributions and benefits can vary within certain parameters, and where paying in is seen as a way of saving money, not losing it.

In short, a deliberate attempt to equate contributions with savings and investments, not taxation.

Such a shift would at once end the stigma and indignity associated with welfare, and weld together the rich and the poor, the individual and the collective, the private and the public interest.

What is more, a shift to a more consumer oriented, user-friendly system of welfare, would have the equally benign impact of clarifying the link between what is paid in, and what is paid out.

Contributions and benefits.

Revenue and expenditure.

Rights and liabilities - re-connected, transparent and understood.

Gone would be the days when politicians can spend a six week election campaign claiming that people can always pay less and receive more.

That there is such a thing as a free tax cut - or a free service for that matter.

Welfare costs money - real, hard-earned money - and a system which faces up to that fact in a clear and honest way is long overdue.

Particularly in the more ‘self-regarding’ areas of welfare such as pensions, or care in old age, a new social contract could be created which does just that.

This contract could, for instance, be reflected in a more personalised system of provision which clearly distinguishes between what is re-distributed and what is kept.

Which shows what is invested on the contributor’s behalf, and what goes to those less able to save and insure for themselves.

Where a degree of ownership, or even account holding is introduced to give people real incentives, real involvement.

A system in which ‘funding’ replaces the less sustainable, less dependable and less transparent Pay-As-You-Go approach we have now.

Of course it remains to be seen how far down this road we should go.

But the notion that saving and contributing to welfare are two distinct activities - one to help ourselves, the other to help the poor - is a divisive and counterproductive one which must be changed.

So too the fashionable assumption that economic competitiveness and social welfare will always be incompatible.

By blurring the divide and filling the gaps, between collective state provision on the one hand and personal private provision on the other, this view will be seen for the nonsense that it is.

After all, unless people are to be denied services and benefits altogether, the choice between paying, and not paying, for welfare simply does not arise.

If leaving the vulnerable, the elderly and the poor without help is what the welfare-sceptics are suggesting, let them at least say so and then we’ll have the debate.

But if it is not, and I sincerely hope it isn’t, then let’s start by asking “how shall we pay for welfare?” and “what are we trying to achieve by doing so?”

My answer to this is simple.

We must pay for welfare together, not alone.

By doing so we will reduce cost, pool risk, and share the burden across the greatest number of people.

Stripped to basics, this means that wherever possible, new systems should be compulsory and inclusive.

Any other option is outdated, inefficient and discriminatory.

Squeezing public provision while subsiding voluntary private provision - the carrot and stick approach so loved by the Tories - is divisive, punitive and very expensive.

If we are to create a platform of opportunity and security for all, we must show more ambition than this.

We should be looking to create a seamless web of provision in which personal savings and collective welfare can merge - a spectrum of choice from family allowances to low income benefits to life-time learning accounts to disability entitlements to pensions to long-term care insurance.

Choice, flexibility, and security.

The social anchors that people will increasingly need in a rapidly changing world.

The welfare state and the market economy - serving mutually to support each other to their shared advantage.

An inclusive and non-discriminatory system in which the private and the public interest are as one.

Where you do not have to choose between helping yourself and helping others because by doing one, you automatically do the other.

Where blame gives way to understanding, and division is replaced by shared interest.

Personal gain and collective advance.

Economic competitiveness and social security.

That is my vision. That is my hope.

A new role for government

But the question of how to make a reality of this vision remains unanswered.

How do we, for instance, increase the total level of savings and insurances whilst keeping taxation at an acceptable level?

How do we launch a crusade against poverty and deprivation without burdening businesses and undermining our ability to compete in the global marketplace?

And how do we look after the vulnerable and the poor whilst at the same time rewarding thrift and recognising the needs of all those above the poverty line?

The answer to all these questions, I believe, lies in forging a new role for government, and a new relationship between the state and the individual.

A task, incidentally, which is not helped one iota by the type of distortion and mis-information that we got during the election exchanges about pensions.

Living out the last years of your life on about £60 a week isn’t fun, and if we are serious about helping our children and grandchildren to do better, then let us put the scare-mongering to one side and instead look in a reasonable and considered fashion at how a better alternative can be devised.

And let’s face it, there must be a better way.

Just ask the first person you meet in the street after this conference whether they feel confident about depending on the basic state pension when they grow old and you will see what I mean.

Because the bottom line is, people can no longer look to the welfare state for adequate support in times of need, even though many have no alternative.

And the underlying cause of this malaise?

For that, as I indicated earlier, I believe we must look at the monopoly over supply which has been enjoyed by the State over the last fifty years. A source of supply dogged by all the downward expenditure pressures and revenue raising limits that politicians, markets, businesses and voters inevitably contrive to impose.

If needs cannot be met within the straight-jacket of public finance, better surely that we accept that fact and look not only for new structures, but also new providers.

For what people want more than anything else is a system they can trust - a system they can really rely on.

They want to see a return on their investments, they want to provide for themselves and for their families and they want to do so with confidence.

They are worried about the future and are distrustful of politicians who offer them the world, but provide them with next to nothing.

They want transparency, certainty and peace of mind.

And, in my view, the time has come when the political community should take a long hard look at itself and decide whether, in all honesty, it can promise to deliver all of this on its own.

Most people already know the answer to this question. But they rarely admit it.

After all, the process of unravelling the state’s stranglehold on welfare provision has already begun. But it has been undertaken largely by stealth.

A threatening squeeze here and a tempting subsidy there - certainly not what most people would consider an honest or an acceptable way to proceed.

It benefits neither the rich nor the poor while accentuating the difference between the two.

Better surely that we re-cast the relationship between the individual and the state in manner that is above board and beyond reproach.

By doing so, we stand to re-energise the implicit social contract on which welfare is based, de-politicise an area of public life that desperately requires stability and consensus, and set in place the foundations for a lasting source of economic, social and personal gain.

By assigning to government the role of regulator, distributor and ultimate guarantor, but, crucially, without sole responsibility for provision, it may well be that the principles on which the welfare state was founded can finally be implemented in a practical and workable way.

For the question of who provides us with savings and insurances is essentially a secondary one. It deals with means, not ends.

In the post war era, the end was security and opportunity for all, the means to that end, state provision.

Today, the objectives are no different. But if we are to meet those objectives, we must do so by new and different ways.

(Needs a concluding para / page)

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